Since prices are constrained to discrete tick multiples while dividends are essentially continuous, ex day price changes will not equal dividends. We argue that the expected price drop is strictly less than the dividend but within one tick of the dividend. The price-drop-to-dividend ratio will (i) be less than one, (ii) increase with dividends generally, and (iii) decline between tick multiples, giving a sawtooth pattern in the data. Since dividends and dividend yields are highly correlated, discreteness will give the impression of tax-induced dividend clienteles even if there are none. Taxable cash dividends and nontaxable stock dividends exhibit similar ex day behavior.

We examine the reaction of daily Treasury bond prices to the release of U.S. macroeconomic news. These news releases (of employment and producer price index data) are of interest because they are released on periodic, preannounced dates and because they are associated with substantial bond market volatility. We investigate whether these nonautocorrelated announcements give rise to autocorrelated volatility. We find that announcement-day volatility does not persist at all, consistent with the immediate incorporation of information into prices. We also find a risk premium on these release dates.

We examine wealth changes for all 1283 publicly traded debt and equity securities of firms involved in 260 pure stock-for-stock mergers from 1963 to 1996. We find no evidence that conglomerate stock-for-stock mergers create financial synergies or benefit bondholders at stockholders' expense. Instead, we document significant net synergistic gains in nonconglomerate mergers and generally insignificant net gains in conglomerate mergers. Conglomerate bidding-firm stockholders lose; all other securityholders at least break even. Convertible securityholders experience the largest gains, due mostly to their attached option values. Certain bond covenants are value-enhancing while leverage increases are value-reducing.